The proposal to exempt health insurance premiums from Goods and Services Tax (GST) continues to face challenges as states remain divided on the issue. The Fitment Committee, which includes revenue officials from both state and Union governments, has yet to reach a consensus.
The GST Council, chaired by Union Finance Minister Nirmala Sitharaman, is expected to make a decision on September 9. The discussions include options such as full exemption, partial exemptions, or reducing the 5% tax rate, with or without Input Tax Credit (ITC).
States are concerned about the potential revenue loss, estimated between Rs 3,200 and Rs 4,000 crore, though the final figure depends on ITC retention. Some states worry about the impact on revenue, while others believe that lower taxes could increase health insurance coverage and offset losses through economic growth.
Currently, health insurance premiums are taxed at 18% GST. The debate intensified after Minister for Road, Transport, and Highways, Nitin Gadkari, advocated for the exemption, citing concerns about the high tax rate’s effect on insurance accessibility.
The deadlock persists as states seek further data to find a balance between consumer relief and revenue protection.
